##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 3, 2001
COMMISSION FILE NUMBER 0-19714

E COM VENTURES, INC.

STATE OF FLORIDA I.R.S. NO. 65-0977964

11701 N.W. 101ST ROAD
MIAMI, FLORIDA 33178

TELEPHONE NUMBER: (305) 889-1600

INDICATE BY CHECK MARK WHETHER THE REGISTRANT, (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING TWELVE (12) MONTHS (OR FOR SUCH SHORTER PERIOD THAT
THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST NINETY (90) DAYS.

YES [(CHECKMARK)]     NO [  ]

COMMON STOCK $.01 PAR VALUE
OUTSTANDING SHARES AT
NOVEMBER 30, 2001, 9,492,412

1



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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED CONDENSED BALANCE SHEETS               
|                              |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                          
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|                              | SIGNATURES                                                                                   



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##### Table of Contents



TABLE OF CONTENTS

E COM VENTURES, INC. AND SUBSIDIARIES

|           |  |                                                                                       |  |  |    |  |    | 
|---------- |  | ------------------------------------------------------------------------------------- |  |  | -- |  | -- | 
|           |  | PART I                                                                                |  |  |    | 
|          
|          
|          
|          
|           |  | FINANCIAL INFORMATION                                                                 |  |  |    | 
|          
|          
|          
|          
|ITEM 1     |  | FINANCIAL STATEMENTS (unaudited)                                                      |  |  | 3  | 
|          
|          
|          
|          
|           |  | Consolidated Condensed Balance Sheets                                                 |  |  | 3  | 
|          
|          
|          
|          
|           |  | Consolidated Condensed Statements of Operations                                       |  |  | 4  | 
|          
|          
|          
|          
|           |  | Consolidated Condensed Statements of Cash Flows                                       |  |  | 5  | 
|          
|          
|          
|          
|           |  | Notes to Consolidated Condensed Financial Statements                                  |  |  | 6  | 
|          
|          
|          
|          
|ITEM 2     |  | MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |  |  | 11 | 
|          
|          
|          
|          
|ITEM 3     |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                           |  |  | 16 | 
|          
|          
|          
|          
|           |  | PART II                                                                               |  |  |    | 
|          
|          
|          
|          
|           |  | OTHER INFORMATION                                                                     |  |  |    | 
|          
|          
|          
|          
|ITEM 1     |  | LEGAL PROCEEDINGS                                                                     |  |  | 16 | 
|          
|          
|          
|          
|ITEM 2     |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |  |  | 16 | 
|          
|          
|          
|          
|ITEM 3     |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  |  | 16 | 
|          
|          
|          
|          
|ITEM 4     |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  |  | 16 | 
|          
|          
|          
|          
|ITEM 5     |  | OTHER INFORMATION                                                                     |  |  | 16 | 
|          
|          
|          
|          
|ITEM 6     |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |  |  | 16 | 
|          
|          
|          
|          
|SIGNATURES |  |                                                                                       |  |  |    |  | 17 | 

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)

|                                                                                                                                          |                                            |                  |             |                  |  |   |             |             | 
|----------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------------- | ----------- | ---------------- |  | - | ----------- | ----------- | 
|ASSETS:                                                                                                                                   |                                            | NOVEMBER 3, 2001 |             | FEBRUARY 3, 2001
|                                                                                                                                          |                                            |                  |             |                 
|Current assets:                                                                                                                           |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Cash and cash equivalents                                                                                                                 |                                            | $                | 1,884,443   |                  |  | $ | 2,219,768   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Trade receivables, net                                                                                                                    |                                            |                  | 1,208,994   |                  |  |   | 1,906,406   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Advances to suppliers                                                                                                                     |                                            |                  | 6,354,123   |                  |  |   | 5,937,106   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Inventories, net                                                                                                                          |                                            |                  | 68,186,354  |                  |  |   | 62,501,712  |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Prepaid expenses and other current assets                                                                                                 |                                            |                  | 1,920,198   |                  |  |   | 3,003,425   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Investments available for sale                                                                                                            |                                            |                  | 1,033,178   |                  |  |   | 565,311     |            
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                          | Total current assets                       |                  |             | 80,587,290       |  |   |             | 76,133,728  | 
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Property and equipment, net                                                                                                               |                                            |                  | 22,473,357  |                  |  |   | 26,412,851  |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Goodwill and other intangible assets                                                                                                      |                                            |                  | 2,941,033   |                  |  |   | 3,558,397   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Other assets                                                                                                                              |                                            |                  | 1,078,190   |                  |  |   | 1,223,841   |            
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                          | Total assets                               |                  | $           | 107,079,870      |  |   | $           | 107,328,817 | 
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                                     |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Current liabilities:                                                                                                                      |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Bank line of credit                                                                                                                       |                                            | $                | 34,282,785  |                  |  | $ | 33,526,504  |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Current portion of long term debt                                                                                                         |                                            |                  | 519,469     |                  |  |   | 1,210,554   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Accounts payable, non-affiliates                                                                                                          |                                            |                  | 20,987,427  |                  |  |   | 12,453,497  |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Accounts payable, affiliate                                                                                                               |                                            |                  | 14,269,507  |                  |  |   | 13,412,811  |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Accrued expenses and other liabilities                                                                                                    |                                            |                  | 6,230,300   |                  |  |   | 6,964,758   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Subordinated note payable, affiliate                                                                                                      |                                            |                  | 2,950,000   |                  |  |   |            |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Current portion of obligations under capital leases                                                                                       |                                            |                  | 1,665,079   |                  |  |   | 1,551,093   |            
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                          | Total current liabilities                  |                  |             | 80,904,567       |  |   |             | 69,119,217  | 
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Long term debt, less current portion                                                                                                      |                                            |                  | 366,007     |                  |  |   | 438,499     |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Long term portion of obligations under capital leases                                                                                     |                                            |                  | 1,431,100   |                  |  |   | 2,601,434   |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Convertible notes payable                                                                                                                 |                                            |                  | 6,494,240   |                  |  |   | 8,775,044   |            
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                          | Total liabilities                          |                  |             | 89,195,914       |  |   |             | 80,934,194  | 
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|Commitments and contingencies                                                                                                             |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Shareholders equity:                                                                                                                     |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Preferred stock, $0.10 par value, 1,000,000
shares authorized, none issued                                                                |                                            |                  |            |                  |  |   |            |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Common stock, $.01 par value, 25,000,000 shares
authorized; 11,921,221 and 11,722,280 shares issued
in fiscal 2001 and 2000, respectively |                                            |                  | 119,213     |                  |  |   | 117,224     |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Additional paid-in capital                                                                                                                |                                            |                  | 71,615,991  |                  |  |   | 71,926,355  |            
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Treasury stock, at cost, 2,428,809 and 1,634,528 shares
in fiscal 2001 and 2000, respectively                                             |                                            |                  | (6,456,494  | )                |  |   | (5,643,377  | )          
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Accumulated deficit                                                                                                                       |                                            |                  | (44,074,064 | )                |  |   | (36,011,206 | )          
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Notes and interest receivable from shareholder and officers                                                                               |                                            |                  | (3,638,462  | )                |  |   | (3,844,278  | )          
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|                                                                                                                                         
|Accumulated other comprehensive income (loss)                                                                                             |                                            |                  | 317,772     |                  |  |   | (150,095    | )          
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                          | Total shareholders equity                 |                  |             | 17,883,956       |  |   |             | 26,394,623  | 
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            
|                                                                                                                                          | Total liabilities and shareholders equity |                  | $           | 107,079,870      |  |   | $           | 107,328,817 | 
|                                                                                                                                          |                                            |                  |             |                  |  |   |             |            

See accompanying notes to consolidated condensed financial statements.

3



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##### Table of Contents






E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |            |            |  
|----------------------------------------------------- | ----------------------------------- | ------------------------ | ---------- | ---------------- | ---------- | ---------------- | ---------- | ----------------- | ---------- | ----------------- | ----------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                                      |                                     |                          |            | Thirteen Weeks   |            | Thirteen Weeks   |            | Thirty-Nine Weeks |            | Thirty-Nine Weeks
|                                                      |                                     |                          |            | Ended            |            | Ended            |            | Ended             |            | Ended            
|                                                      |                                     |                          |            | November 3, 2001 |            | October 28, 2000 |            | November 3, 2001  |            | October 28, 2000 
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                  
|Net sales                                             |                                     | $                        | 41,864,998 |                  |            | $                | 47,214,024 |                   |            | $                 | 126,649,439 |            |            | $ | 135,466,342 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Cost of goods sold                                    |                                     |                          | 24,545,792 |                  |            |                  | 29,286,263 |                   |            |                   | 74,001,377  |            |            |   | 81,731,874  |           
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|Gross profit                                          |                                     |                          | 17,319,206 |                  |            |                  | 17,927,761 |                   |            |                   | 52,648,062  |            |            |   | 53,734,468  |           
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|Operating expenses:                                   |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Selling, general and administrative |                          |            | 17,772,506       |            |                  |            | 18,786,411        |            |                   |             | 52,913,203 |            |   |             | 56,705,603 |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Depreciation and amortization       |                          |            | 1,683,910        |            |                  |            | 1,736,262         |            |                   |             | 5,177,948  |            |   |             | 4,272,163  |           
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                      |                                     | Total operating expenses |            |                  | 19,456,416 |                  |            |                   | 20,522,673 |                   |             |            | 58,091,151 |   |             |            | 60,977,766 |  
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|Loss from operations                                  |                                     |                          | (2,137,210 | )                |            |                  | (2,594,912 | )                 |            |                   | (5,443,089  | )          |            |   | (7,243,298  | )         
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|Interest expense, net                                 |                                     |                          | (807,912   | )                |            |                  | (1,280,039 | )                 |            |                   | (2,619,769  | )          |            |   | (6,837,758  | )         
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in loss of partially-owned affiliate           |                                     |                          |           |                  |            |                  |           |                   |            |                   |            |            |            |   | (1,388,245  | )         
|                                                     
|                                                     
|                                                     
|                                                     
|Gain on sale of affiliate common stock                |                                     |                          |           |                  |            |                  |           |                   |            |                   |            |            |            |   | 9,998,454   |           
|                                                     
|                                                     
|                                                     
|                                                     
|Other (expense) income                                |                                     |                          |           |                  |            |                  | (273,625   | )                 |            |                   |            |            |            |   | 105,771     |           
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                      |                                     | Net loss                 |            | $                | (2,945,122 | )                |            | $                 | (4,148,576 | )                 |             | $          | (8,062,858 | ) |             | $          | (5,365,076 | )
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|Net loss per common share:                            |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                               |                          | $          | (0.31            | )          |                  | $          | (0.42             | )          |                   | $           | (0.82      | )          |   | $           | (0.58      | )         
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                      | Diluted                             |                          | $          | (0.31            | )          |                  | $          | (0.42             | )          |                   | $           | (0.82      | )          |   | $           | (0.58      | )         
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|Weighted average number of common
shares outstanding: |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic                               |                          |            | 9,528,126        |            |                  |            | 9,859,685         |            |                   |             | 9,801,559  |            |   |             | 9,185,369  |           
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           
|                                                      | Diluted                             |                          |            | 9,528,126        |            |                  |            | 9,859,685         |            |                   |             | 9,801,559  |            |   |             | 9,185,369  |           
|                                                      |                                     |                          |            |                  |            |                  |            |                   |            |                   |             |            |            |   |             |           

See accompanying notes to consolidated condensed financial statements.

4



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##### Table of Contents






E COM VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                          |                                                      |   |                         |            |                         |   |            |            |  
|----------------------------------------------------------------------------------------- | ---------------------------------------------------- | - | ----------------------- | ---------- | ----------------------- | - | ---------- | ---------- | -
|                                                                                          |                                                      |   | Thirty-Nine Weeks Ended |            | Thirty-Nine Weeks Ended
|                                                                                          |                                                      |   | November 3, 2001        |            | October 28, 2000       
|                                                                                          |                                                      |   |                         |            |                        
|Cash flows from operating activities:                                                     |                                                      |   |                         |            |                         |   |            |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net loss                                                                                  |                                                      | $ | (8,062,858              | )          |                         | $ | (5,365,076 | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |                                                      |   |                         |            |                         |   |            |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Provision for doubtful accounts                                                           |                                                      |   | 45,000                  |            |                         |   | 46,682     |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Reversal for impairment of assets                                                         |                                                      |   |                        |            |                         |   | (1,006,333 | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Gain on sale of affiliate stock                                                           |                                                      |   |                        |            |                         |   | (9,998,454 | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Provision for impairment of assets and store closing                                      |                                                      |   | 590,501                 |            |                         |   | 119,328    |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Depreciation and amortization                                                             |                                                      |   | 5,177,948               |            |                         |   | 4,272,163  |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Equity in loss of partially-owned affiliate                                               |                                                      |   |                        |            |                         |   | 1,388,245  |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Beneficial conversion feature of convertible notes payable                                |                                                      |   |                        |            |                         |   | 2,636,763  |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Change in operating assets and liabilities:                                               |                                                      |   |                         |            |                         |   |            |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Trade receivables                                    |   |                         | 652,412    |                         |   |            | (440,116   | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Advances to suppliers                                |   |                         | (417,017   | )                       |   |            | (5,795,720 | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Inventories                                          |   |                         | (5,684,642 | )                       |   |            | (842,777   | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Prepaid expenses and other current assets            |   |                         | 1,083,227  |                         |   |            | (1,348,985 | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Other assets                                         |   |                         | 158,762    |                         |   |            | (294,213   | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Accounts payable                                     |   |                         | 12,390,626 |                         |   |            | 10,678,553 |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Accrued expenses and other liabilities               |   |                         | (733,137   | )                       |   |            | (249,789   | )
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|Net cash provided by (used in) operating activities                                       |                                                      |   | 5,200,822               |            |                         |   | (6,199,729 | )         
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|Cash flows from investing activities:                                                     |                                                      |   |                         |            |                         |   |            |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Additions to property and equipment                                                       |                                                      |   | (1,224,702              | )          |                         |   | (4,628,825 | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Investments in and advances to partially-owned affiliates                                 |                                                      |   |                        |            |                         |   | (3,242,722 | )         
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|Net cash used in investing activities                                                     |                                                      |   | (1,224,702              | )          |                         |   | (7,871,547 | )         
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|Cash flows from financing activities:                                                     |                                                      |   |                         |            |                         |   |            |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net (repayments) and borrowings under bank line
of credit and notes payable               |                                                      |   | (57,296                 | )          |                         |   | 5,507,958  |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Repayment of subordinated notes                                                           |                                                      |   |                        |            |                         |   | (3,000,000 | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Principal payments under capital lease obligations                                        |                                                      |   | (1,056,348              | )          |                         |   | (277,972   | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net repayments (advances) to shareholders and officers                                    |                                                      |   | 205,816                 |            |                         |   | (1,684,550 | )         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|(Repayment) issuance of convertible notes payable                                         |                                                      |   | (2,600,000              | )          |                         |   | 9,000,000  |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Proceeds from sale of affiliate common stock                                              |                                                      |   |                        |            |                         |   | 6,500,000  |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Exercise of stock options                                                                 |                                                      |   | 9,500                   |            |                         |   | 178,725    |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Purchases of treasury stock                                                               |                                                      |   | (813,117                | )          |                         |   | (2,100,084 | )         
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|                                                                                          | Net cash (used in ) provided by financing activities |   |                         | (4,311,445 | )                       |   |            | 14,124,077 |  
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|(Decrease) increase in cash and cash equivalents                                          |                                                      |   | (335,325                | )          |                         |   | 52,801     |           
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Cash and cash equivalents at beginning of period                                          |                                                      |   | 2,219,768               |            |                         |   | 1,995,610  |           
|                                                                                          |                                                      |   |                         |            |                         |   |            |           
|Cash and cash equivalents at end of period                                                |                                                      | $ | 1,884,443               |            |                         | $ | 2,048,411  |           
|                                                                                          |                                                      |   |                         |            |                         |   |            |           

See accompanying notes to consolidated condensed financial statements.

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##### Table of Contents






E COM VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1- OPERATIONS AND BASIS OF PRESENTATION

E Com Ventures, Inc., a Florida Corporation (ECOMV or the Company), is
a holding company that owns and operates two subsidiaries, Perfumania, Inc.
(Perfumania), a Florida corporation, which is a specialty retailer and
wholesaler of fragrances and related products, and perfumania.com, inc., an
Internet retailer of fragrance and other specialty items.

Perfumanias retail stores are located in regional malls, manufacturers
outlet malls, airports and on a stand-alone basis in suburban strip shopping
centers. The number of retail stores in operation at November 3, 2001 and
October 28, 2000, were 248 and 266, respectively.

The consolidated condensed financial statements include the accounts of
ECOMV and its subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.

The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission (the SEC). Certain information and note
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted as permitted by those rules and
regulations. The Company believes that the disclosures made are adequate to
make the information presented not misleading. The financial information
presented herein, which is not necessarily indicative of results to be expected
for the current fiscal year, reflect all adjustments which, in the opinion of
management, are necessary for a fair presentation of the interim unaudited
consolidated condensed financial statements. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in our Annual Report on
Form 10-K for the fiscal year ended February 3, 2001 filed with the SEC on May
4, 2001.

RECLASSIFICATION

Certain fiscal 2000 amounts have been reclassified to conform with the
fiscal 2001 presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141 (SFAS 141), Accounting
for Business Combinations, and Statement of Financial Accounting Standards No.
142 (SFAS 142), Goodwill and Other Intangible Assets. These Statements
modify accounting for business combinations after June 30, 2001 and will affect
the Companys treatment of goodwill and other intangible assets at the start of
fiscal year 2002. The Statements require that goodwill existing at the date of
adoption be reviewed for possible impairment and that impairment tests be
periodically repeated, with impaired assets written-down to fair value.
Additionally, existing goodwill and intangible assets must be assessed and
classified consistent with the Statements criteria. Amortization of goodwill
and other intangible assets with indefinite useful lives will cease. At this
time, the Company has not determined the complete impact of these Statements.
For the thirty-nine weeks ended November 3, 2001, the Company has recognized
approximately $0.6 million of goodwill amortization.

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 (SFAS 143), Accounting For Asset Retirement Obligations. This
Statement requires capitalizing any retirement costs as part of the total cost
of the related long-lived asset and subsequently allocating the total expense
to future periods using a systematic and rational method. Adoption of this
Statement is required for fiscal years beginning after June 15, 2002. The
Company has not determined the impact of this Statement on its financial
position and results of operations.

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##### Table of Contents



In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 (SFAS 144), Accounting For The Impairment Or Disposal Of
Long-Lived Assets. This Statement supersedes Statement No. 121 but retains
many of its fundamental provisions. Additionally, this Statement expands the
scope of discontinued operations to include more disposal transactions. The
provisions of this Statement are effective for financial statements issued for
fiscal years beginning after December 15, 2001. The Company has not determined
the impact of this Statement on its financial position and results of
operations.

NOTE 2  BANK LINE OF CREDIT

Perfumanias three year senior secured credit facility with GMAC
Commercial Credit LLC provides for borrowings of up to $40 million, of which
$34.3 million was outstanding and $2.7 million was available at November 3,
2001. The credit facility, which expires May 2003, supports normal working
capital requirements and other general corporate purposes. As of November 3,
2001, the credit facility bore interest at the rate of 5.0%. Borrowings are
secured by a first lien on all assets of Perfumania and the assignment of a
life insurance policy on an officer of the Company. The line contains
limitations on additional borrowings and capital expenditures among other
items, and contains various covenants including maintenance of minimum net
worth, and certain key ratios, as defined by the lender. As of November 3,
2001, Perfumania was in compliance with all financial covenants.

NOTE 3  BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

Basic income (loss) per common share has been computed by dividing net
income (loss) by the weighted average number of common shares outstanding
during the period. Diluted income (loss) per share includes, in periods in
which common stock equivalents have a dilutive effect, the impact of common
shares issuable upon exercise of stock options and other common stock
equivalents. For all periods presented in the accompanying consolidated
condensed statements of operations, incremental shares attributed to
outstanding stock options and convertible notes were not included because the
results would be anti-dilutive.

NOTE 4   COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) represents all non-owner changes in
shareholders equity and consists of the following:

|                                                                              |                          |   |                  |            |                  |   |                   |             |                   |   |            |            |   |   |            |            |  
|----------------------------------------------------------------------------- | ------------------------ | - | ---------------- | ---------- | ---------------- | - | ----------------- | ----------- | ----------------- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                              |                          |   | Thirteen Weeks   |            | Thirteen Weeks   |   | Thirty-Nine Weeks |             | Thirty-Nine Weeks
|                                                                              |                          |   | Ended            |            | Ended            |   | Ended             |             | Ended            
|                                                                              |                          |   | November 3, 2001 |            | October 28, 2000 |   | November 3, 2001  |             | October 28, 2000 
|                                                                              |                          |   |                  |            |                  |   |                   |             |                  
|Net loss                                                                      |                          | $ | (2,945,122       | )          |                  | $ | (4,148,576        | )           |                   | $ | (8,062,858 | )          |   | $ | (5,365,076 | )         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other comprehensive (loss) income -
Net unrealized gain (loss)
on investments |                          |   | 858,293          |            |                  |   | (9,413,339        | )           |                   |   | 467,867    |            |   |   | 1,011,557  |           
|                                                                              |                          |   |                  |            |                  |   |                   |             |                   |   |            |            |   |   |            |           
|                                                                              | Total comprehensive loss |   | $                | (2,086,829 | )                |   | $                 | (13,561,915 | )                 |   | $          | (7,594,991 | ) |   | $          | (4,353,519 | )
|                                                                              |                          |   |                  |            |                  |   |                   |             |                   |   |            |            |   |   |            |           

7



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##### Table of Contents



NOTE 5   SEGMENT INFORMATION

Perfumania operates in two industry segments, specialty retail sale and
wholesale distribution of fragrances and related products. Financial
information for these segments is summarized in the following table.

|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |             |             | 
|-------------------------------- | --------- | ------------------------------------- | ---------- | ---------------- | ---------- | ---------------- | ---------- | ----------------- | ---------- | ----------------- | ---------- | ----------- | ----------- | - | ---------- | ----------- | ----------- | 
|                                 |           |                                       |            | Thirteen Weeks   |            | Thirteen Weeks   |            | Thirty-Nine Weeks |            | Thirty-Nine Weeks
|                                 |           |                                       |            | Ended            |            | Ended            |            | Ended             |            | Ended            
|                                 |           |                                       |            | November 3, 2001 |            | October 28, 2000 |            | November 3, 2001  |            | October 28, 2000 
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                  
|Net sales to external customers: |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                
|                                
|                                
|                                
|                                 | Wholesale |                                       | $          | 995,117          |            |                  | $          | 5,301,580         |            |                   | $          | 8,500,563   |             |   | $          | 18,062,735  |            
|                                
|                                
|                                
|                                
|                                 | Retail    |                                       |            | 40,869,881       |            |                  |            | 41,912,444        |            |                   |            | 118,148,876 |             |   |            | 117,403,607 |            
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                 |           | Total net sales to external customers |            | $                | 41,864,998 |                  |            | $                 | 47,214,024 |                   |            | $           | 126,649,439 |   |            | $           | 135,466,342 | 
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|Cost of goods sold:              |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                
|                                
|                                
|                                
|                                 | Wholesale |                                       | $          | 879,623          |            |                  | $          | 4,529,565         |            |                   | $          | 6,797,286   |             |   | $          | 14,512,582  |            
|                                
|                                
|                                
|                                
|                                 | Retail    |                                       |            | 23,666,169       |            |                  |            | 24,756,698        |            |                   |            | 67,204,091  |             |   |            | 67,219,292  |            
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|Total cost of goods sold:        |           | $                                     | 24,545,792 |                  |            | $                | 29,286,263 |                   |            | $                 | 74,001,377 |             |             | $ | 81,731,874 |            
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|Gross profit:                    |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                
|                                
|                                
|                                
|                                 | Wholesale |                                       | $          | 115,494          |            |                  | $          | 772,015           |            |                   | $          | 1,703,277   |             |   | $          | 3,550,153   |            
|                                
|                                
|                                
|                                
|                                 | Retail    |                                       |            | 17,203,712       |            |                  |            | 17,155,746        |            |                   |            | 50,944,785  |             |   |            | 50,184,315  |            
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                 |           | Total gross profit                    |            | $                | 17,319,206 |                  |            | $                 | 17,927,761 |                   |            | $           | 52,648,062  |   |            | $           | 53,734,468  | 
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|Depreciation and amortization:   |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                
|                                
|                                
|                                
|                                 | Retail    |                                       | $          | 1,268,446        |            |                  | $          | 1,258,417         |            |                   | $          | 3,882,556   |             |   | $          | 2,942,322   |            
|                                
|                                
|                                
|                                
|                                 | Corporate |                                       |            | 415,464          |            |                  |            | 477,845           |            |                   |            | 1,295,392   |             |   |            | 1,329,841   |            
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                 |           | Total depreciation and amortization   |            | $                | 1,683,910  |                  |            | $                 | 1,736,262  |                   |            | $           | 5,177,948   |   |            | $           | 4,272,163   | 
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|Capital expenditures:            |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                
|                                
|                                
|                                
|                                 | Retail    |                                       | $          | 367,954          |            |                  | $          | 1,791,158         |            |                   | $          | 908,056     |             |   | $          | 2,428,999   |            
|                                
|                                
|                                
|                                
|                                 | Corporate |                                       |            | 174,061          |            |                  |            | 585,912           |            |                   |            | 316,646     |             |   |            | 2,199,286   |            
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            
|                                 |           | Total capital expenditures            |            | $                | 542,015    |                  |            | $                 | 2,377,070  |                   |            | $           | 1,224,702   |   |            | $           | 4,628,285   | 
|                                 |           |                                       |            |                  |            |                  |            |                   |            |                   |            |             |             |   |            |            

|           |           |   |                  |            |                  |   |            |            | 
|---------- | --------- | - | ---------------- | ---------- | ---------------- | - | ---------- | ---------- | 
|           |           |   | November 3, 2001 |            | February 3, 2001
|           |           |   |                  |            |                 
|Inventory: |           |   |                  |            |                  |   |            |           
|          
|          
|          
|          
|           | Wholesale |   |                  |           |                  |   | $          | 1,213,000  | 
|          
|          
|          
|          
|           | Retail    |   |                  | 68,186,354 |                  |   |            | 61,288,712 | 
|           |           |   |                  |            |                  |   |            |           
|           |           | $ | 68,186,354       |            |                  | $ | 62,501,712 |           
|           |           |   |                  |            |                  |   |            |           

NOTE 6  INVESTMENTS AVAILABLE FOR SALE

The Company has investments in Internet related businesses. The carrying
value of these investments as of November 3, 2001 totaled $1.0 million. The
increase in Investments available for sale is a result of the net unrealized
gain in the market value of such investments which is reflected in accumulated
other comprehensive income. There were no investment transactions during the
first thirty-nine weeks of fiscal 2001.

8



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##### Table of Contents



NOTE 7  CONVERTIBLE NOTES PAYABLE

In February 2001, the Company entered into a Convertible Note Option
Repurchase Agreement (the Agreement) with the holders of the Companys
outstanding Series A, B, C and D Convertible Notes. The Agreement provides that
the Company has the option to repurchase the total outstanding convertible
notes over an eleven month period beginning February 2001, at a price equal to
the unpaid principal balance plus a 20% premium. The portion of the notes
redeemable in each of the eleven months varies as per a specified redemption
schedule. In the event the Company exercises its option, the note holders are
restricted from converting any part of the remaining outstanding and unpaid
principal balance of such holders notes into the Companys common stock. The
convertible notes bear interest at 8% and each series mature at various dates
from April 2002 to March 2003. During the first thirty-nine weeks of fiscal
year 2001, the Company paid $2.6 million to the note holders which represented
$2.2 million of principal and $0.4 million of premium.

NOTE 8  RELATED PARTY TRANSACTIONS

Notes receivable from a shareholder and officer were approximately $3.6
million as of November 3, 2001. The notes are secured by certain stock options
and investments held by the shareholder and officer, mature December 31, 2001
and bear interest at 8% per annum. Principal and interest are payable in full
at maturity.

On June 30, 2001, Perfumania signed a $3,000,000 subordinated note
agreement with Parlux Fragrances, Inc., (Parlux) whose Chairman of the Board
of Directors and Chief Executive Officer, Ilia Lekach, is the Companys
Chairman of the Board and Chief Executive Officer. The note represents the
reduction of $3,000,000 in trade payables due to Parlux. The note is due on
March 31, 2002 with monthly principal and interest payments beginning October
31, 2001, bears interest at prime plus 1% and is subordinate to all bank
related indebtedness. The outstanding amount of the indebtedness as of
November 3, 2001 is reflected in the accompanying consolidated condensed
balance sheet as subordinated note payable, affiliate.

Effective September 1, 2001, perfumania.com, inc. entered into a licensing
agreement with TaketoAuction.com, Inc. (TTA) whose Chairman of the Board and
Chief Executive Officer, Ilia Lekach, is the Companys Chairman of the Board
and Chief Executive Officer. The license agreement allows TTA to operate the
Companys Internet retail fragrance business. TTA sells products
through the perfumania.com web site. The Company sells its inventory
to TTA at cost plus a nominal
mark-up. Additionally, under the terms of the license agreement, TTA pays
royalties of 5% for product sales up to $8 million per year, 4% of sales
between $8 million and $11 million per year and 3% of sales exceeding $11
million per year. Royalty income under this agreement through November 3, 2001
was approximately $22,000.

NOTE 9  TREASURY STOCK

As of November 3, 2001, the Company had acquired approximately 2.4 million
shares of treasury stock for a total cost of approximately $6.5 million. For
the thirteen and thirty-nine week periods ended November 3, 2001, the Company
acquired approximately 85,000 and 794,000 shares of common stock for
approximately $0.1 million and $0.8 million at an average cost per share of
approximately $1.

NOTE 10  CONTINGENCIES

The Company is involved in legal proceedings in the ordinary course of
business. Management cannot presently predict the outcome of these matters.
Management believes that the Company has meritorious defenses and that the
ultimate resolution of these matters should not have a materially adverse
effect on the Companys financial position or result of operations.

9



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##### Table of Contents



NOTE 11  NON-CASH TRANSACTIONS

Supplemental disclosures of non-cash investing and financing activities
are as follows:

|                                                                                      |              |   |                                 |           |                  |   |           |           |  |  |  |  | 
|------------------------------------------------------------------------------------- | ------------ | - | ------------------------------- | --------- | ---------------- | - | --------- | --------- |  |  |  |  | 
|                                                                                      |              |   | For the Thirty-Nine Weeks Ended
|                                                                                      |              |   |                                
|                                                                                      |              |   | November 3, 2001                |           | October 28, 2000
|                                                                                      |              |   |                                 |           |                 
|Conversion of notes payable and accrued interest
payable in exchange for common stock |              | $ | 115,459                         |           |                  | $ | 3,704,470 |          
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Decrease in accounts payable in exchange for
subordinated notes payable  affiliate   |              | $ | 3,000,000                       |           |                  | $ | 3,000,000 |          
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net unrealized gain on marketable securities                                          |              | $ | 467,867                         |           |                  | $ | 1,011,557 |          
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Cash paid during the period for:                                                      |              |   |                                 |           |                  |   |           |          
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Interest     |   | $                               | 2,988,034 |                  |   | $         | 4,748,019 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Income taxes |   | $                               | 150,000   |                  |   | $         | 150,391   | 

10



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##### Table of Contents



PART I.    FINANCIAL INFORMATION




|        |                                                                           
|------- | --------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
|        | OPERATIONS                                                                



RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

Some of the statements in this quarterly report, including those that
contain the words anticipate, believe, plan, estimate, expect,
should, intend and other similar expressions, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or its industry to be materially different from
any future results, performance or achievements expressed or implied by those
forward-looking statements.

We may have problems raising money needed in the future

Our growth strategy includes selectively opening and operating new
Perfumania retail locations and increasing the average retail sales per store.
We may need to obtain funding to achieve our growth strategy. Additional
financing may not be available on acceptable terms, if at all. In order to
obtain additional financing, we may be required to issue securities with
greater rights than those currently possessed by holders of our common stock.
We may also be required to take other actions which may lessen the value of our
common stock, including borrowing money on terms that are not favorable to us.

Perfumanias business is subject to seasonal fluctuations, which could lead to
fluctuations in our stock price

Perfumania has historically experienced and expects to continue
experiencing higher sales in the third and fourth fiscal quarters than in the
first and second fiscal quarters. Purchases of fragrances as gift items
increase during the Christmas holiday season which results in significantly
higher fourth fiscal quarter retail sales. If our quarterly operating results
are below expectations of stock market analysts, our stock price might decline.
Our quarterly results may also vary as a result of the timing of new store
openings and store closings, net sales contributed by new stores and
fluctuations in comparable sales of existing stores. Sales levels of new and
existing stores are affected by a variety of factors, including the retail
sales environment, the level of competition, the effect of marketing and
promotional programs, acceptance of new product introductions, adverse weather
conditions and general economic conditions.

Perfumanias business has been affected by an economic downturn

Since the third quarter of 2000, the U.S. economy has shown signs of a
downturn, and the events of September 11 have further exacerbated the
situation. The retail industry, in general, is displaying signs of a slowdown,
both in and outside our industry segment, with many companies reporting
earnings shortfalls compared to market expectations over the last several
months. This general economic slowdown negatively impacted our results during
the first nine months of 2001, and may continue to adversely impact our
business and the results of our operations.

Perfumania may experience shortages of the merchandise it needs because it does
not have long-term agreements with suppliers

Perfumanias success depends to a large degree on our ability to provide
an extensive assortment of brand name and designer fragrances. Perfumania has
no long-term purchase contracts or other contractual assurance of continued
supply, pricing or access to new products. While we believe that Perfumania
has good relationships with its suppliers, if Perfumania is unable to obtain
merchandise from one or more key suppliers on a timely basis, or if there is a
material change in Perfumanias ability to obtain necessary merchandise, our
results of operations could be seriously harmed.

11



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##### Table of Contents



Perfumania needs to successfully manage its growth

Perfumanias growth is somewhat dependent upon opening and operating new
retail stores on a profitable basis, which in turn is subject to, among other
things, securing suitable sites on satisfactory terms, hiring, training and
retaining qualified management and other personnel, having adequate capital
resources and successfully integrating new stores into existing operations. It
is possible that Perfumanias new stores might not achieve sales and
profitability comparable to existing stores, and it is possible that the
opening of new locations might adversely effect sales at existing locations.

Perfumania could be subject to litigation because of the merchandising aspect of its business

Some of the merchandise Perfumania purchases from suppliers is
manufactured by entities who are not the owners of the trademarks or copyrights
for the merchandise. This practice is common in the fragrance and cosmetics
business. The owner of a particular trademark or copyright may challenge
Perfumania to demonstrate that the specific merchandise was produced and sold
with the proper authority and if Perfumania is unable to demonstrate this, it
could, among other things, be restricted from reselling the particular
merchandise. This type of restriction could seriously harm Perfumanias
business and results of operations.

Future growth may place strains on our managerial, operational and financial resources

Future growth may place a significant strain on our managerial,
operational and financial resources. Further, as the number of our users,
advertisers and other business partners grow, we will be required to manage
multiple relationships with various customers, strategic partners and other
third parties. Future growth or increase in the number of our strategic
relationships might strain our managerial, operational and financial resources,
inhibiting our ability to achieve the rapid execution necessary to successfully
implement our business plan. In addition, our future success will also depend
on our ability to expand our sales and marketing organization and our support
organization commensurate with the growth of our business and the Internet.

We are subject to intense competition

Some of Perfumanias competitors sell fragrances at discount prices, and
some are part of large international, national or regional chains that have
substantially greater resources and name recognition than Perfumania.
Perfumanias stores compete on the basis of selling price, customer service,
merchandise variety and store location. Many of our current and potential
competitors have greater financial, technical, operational, and marketing
resources. We may not be able to compete successfully against these
competitors in developing our products or services.

Expanding our business through acquisitions and investments in other businesses
and technologies presents special risks

We may expand through the acquisition of and investment in other
businesses. Acquisitions involve a number of special problems, including:



| |  |  | difficulty integrating acquired technologies, operations, and
personnel with our existing business;                 
| | - |  | --------------------------------------------------------------------------------------------------------------------
|
| |  |  | diversion of managements attention in connection with both
negotiating the acquisitions and integrating the assets;
|
| |  |  | the need for additional financing;                                                                                  
|
| |  |  | strain on managerial and operational resources as management
tries to oversee larger operations; and                
|
| |  |  | exposure to unforeseen liabilities of acquired companies.                                                           

We may not be able to successfully address these problems. Moreover, our
future operating results will depend to a significant degree on our ability to
successfully manage growth and integrate acquisitions. In addition, many of
our investments might be in early-stage companies with limited operating
histories and limited or no revenues. We may not be able to successfully
develop these early-stage companies.

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RESULTS OF OPERATIONS

COMPARISON OF THE THIRTEEN WEEKS ENDED NOVEMBER 3, 2001 WITH THE THIRTEEN WEEKS ENDED OCTOBER 28, 2000.

Net sales decreased 11.3% from $47.2 million in the thirteen weeks ended
October 28, 2000 to $41.9 million in the thirteen weeks ended November 3, 2001.
Wholesale sales decreased 81.2% (from $5.3 million to $1.0 million) and
retail sales decreased by 2.5% (from $41.9 million to $40.9 million). The
decrease in wholesale sales was due to our continuing strategic initiative to
redirect our managerial, administrative and inventory resources to our retail
operations. The decrease in retail sales was principally due to a reduction in
the number of operating stores during the current period. Comparable store
sales increased 1.8% when compared to last year.

Gross profit decreased 3.4% from $17.9 million in the thirteen weeks ended
October 28, 2000 (38.0% of net sales) to $17.3 million in the thirteen weeks
ended November 3, 2001 (41.4% of net sales) due to a decrease in gross profit
for the wholesale division which was partially offset by an increase in gross
profit for the retail division.

Gross profit for the wholesale division decreased from $0.8 million in the
thirteen weeks ended October 28, 2000 to $0.1 million in the thirteen weeks
ended November 3, 2001 as a result of lower wholesale sales. As a percentage
of wholesale sales, gross profit for the wholesale division decreased from
14.6% in the thirteen weeks ended October 28, 2000 to 11.6% in the thirteen
weeks ended November 3, 2001.

Gross profit for the retail division was $17.2 million in both the
thirteen week periods ended November 3, 2001 and October 28, 2000. As a
percentage of retail sales, gross profit for the retail division increased from
40.9% in the thirteen weeks ended October 28, 2000 to 42.1% in the thirteen
weeks ended November 3, 2001, primarily as a result of higher margins on
merchandise sold.

Selling, general and administrative expenses decreased 5.4% from $18.8
million in the thirteen weeks ended October 28, 2000 to $17.8 million in the
thirteen weeks ended November 3, 2001. The decrease is attributable to a
reduction in the number of retail stores in operation and improved cost control
efforts. The average number of stores operated during the thirteen weeks ended
November 3, 2001 compared to the thirteen weeks ended October 28, 2000
decreased from 263 to 248.

Depreciation and amortization expense was $1.7 million in both the
thirteen week periods ended October 28, 2000 and November 3, 2001.

EBITDA, defined as loss from operations less depreciation and
amortization, improved by $0.4 million from ($0.9) million in the thirteen
weeks ended October 28, 2000 to ($0.5) million in the thirteen weeks ended
November 3, 2001, due primarily to lower selling, general and administrative
expenses as described above.

Interest expense, net decreased by 36.9% from $1.3 million for the
thirteen weeks ended October 28, 2000 to $0.8 million for the thirteen weeks
ended November 3, 2001. The decrease results from lower interest rates, a
lower outstanding balance on our bank line of credit and a reduction in the
outstanding balance of convertible notes payable in the thirteen weeks ended
November 3, 2001 compared to the thirteen weeks ended October 28, 2000.

As a result of the foregoing, we had a net loss of $2.9 million, or
($0.31) per diluted share, in the thirteen weeks ended November 3, 2001
compared to a net loss of $4.1 million, or $(0.42) per diluted share in the
thirteen weeks ended October 28, 2000.

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COMPARISON OF THE THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2001 WITH THE THIRTY-NINE
WEEKS ENDED OCTOBER 28, 2000.

Net sales decreased 6.5% from $135.5 million in the thirty-nine weeks
ended October 28, 2000 to $126.6 million in the thirty-nine weeks ended
November 3, 2001. The decrease in net sales was due primarily to a 52.9%
decrease in wholesale sales (from $18.1 million to $8.5 million) offset by a
0.6% increase in retail sales (from $117.4 million to $118.1 million).

The decrease in wholesale sales was due to our decision to redirect our
managerial, administrative and inventory resources to our retail operations.
Wholesale sales are expected to continue to decrease during the remainder of
fiscal 2001 when compared to the prior year. The increase in retail sales was
principally attributed to an increase in comparable store sales. Comparable
store sales increased 0.5% when compared to last year.

Gross profit decreased 2.0% from $53.7 million in the thirty-nine weeks
ended October 28, 2000 (39.7% of net sales) to $52.6 million in the thirty-nine
weeks ended November 3, 2001 (41.6% of net sales) as a result of decreases in
wholesale sales which was partially offset by an increase in retail sales.

Gross profit for the wholesale division decreased 52.0% from $3.6 million
in the thirty-nine weeks ended October 28, 2000 to $1.7 million in the
thirty-nine weeks ended November 3, 2001. As a percentage of wholesale sales,
gross profit for the wholesale division increased from 19.7% in the thirty-nine
weeks ended October 28, 2000 to 20.0% in the thirty-nine weeks ended November
3, 2001.

Gross profit for the retail division increased 1.5% from $50.2 million in
the thirty-nine weeks ended October 28, 2000 to $50.9 million in the
thirty-nine weeks ended November 3, 2001. The retail divisions gross margin
was 43.1% in the thirty-nine weeks ended November 3, 2001 and 42.7% in the
thirty-nine weeks ended October 28, 2000.

Selling, general and administrative expenses decreased 6.7% from $56.7
million in the thirty-nine weeks ended October 28, 2000 to $52.9 million in the
thirty-nine weeks ended November 3, 2001. The decrease was attributable to 1)
approximately $0.8 million of severance and consulting costs accrued during
fiscal 2000 for various senior management whose employment with the Company was
terminated during the second quarter of that fiscal year, 2) a reduction in the
number of retail stores in operation and 3) improved cost control efforts. The
average number of stores operated during the thirty-nine weeks ended November
3, 2001 compared to the thirty-nine weeks ended October 28, 2000 decreased from
266 to 251.

Depreciation and amortization expense increased 21.2% from $4.3 million in
the thirty-nine weeks ended October 28, 2000 to $5.2 million in the thirty-nine
weeks ended November 3, 2001 due primarily to increases in capital spending for
system enhancements over the past year, and amortization of goodwill resulting
from the acquisition of perfumania.com, inc. in May 2000.

EBITDA, defined as earnings (loss) from operations less depreciation and
amortization, improved by $2.7 million from ($3.0) million in the first
thirty-nine weeks of 2000 to ($0.3) million in the first thirty-nine weeks of
2001, due to increased gross profit and lower selling, general and
administrative expenses as described above.

Interest expense, net decreased by 61.7% from $6.8 million for the
thirty-nine weeks ended October 28, 2000 to $2.6 million for the thirty-nine
weeks ended November 3, 2001. The decrease was principally due to the non-cash
beneficial conversion cost of approximately $2.6 million associated with the
issuance of convertible notes in March 2000 combined with lower interest costs
on our bank line of credit, a reduction in the outstanding balance of
convertible notes payable and a lower outstanding balance on our bank line of
credit in the thirty-nine weeks ended November 3, 2001 compared to the
thirty-nine weeks ended October 28, 2000.

Equity in loss of partially-owned affiliate of $1.4 million in fiscal year
2000 represents our share of Envision Development Corporations (EDC) net loss
for the period we owned in excess of 20% of EDCs outstanding shares (February
through May 2000).

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Gain on sale of affiliates common stock of $10.0 million in fiscal year
2000 resulted from the sale of shares of EDC.

During the thirty-nine weeks ended November 3, 2001 the Company had a net
loss of $8.1 million or $(0.82) per diluted share, compared to a net loss of
$5.4 million or ($0.58) per diluted share during the thirty-nine weeks ended
October 28, 2000.

LIQUIDITY AND CAPITAL RESOURCES

Our principal capital requirements are to fund working capital needs and
to renovate existing stores. For the first thirty-nine weeks of fiscal 2001,
these capital requirements generally were satisfied through borrowings under
our credit facility and cash flows from operations.

At November 3, 2001, we had a working capital deficiency of approximately
($0.3) million compared to working capital of approximately $7.0 million at
February 3, 2001. The decrease was primarily due to the
Companys operating results and the repayment of convertible
notes payable. The Companys business follows a seasonal pattern that peaks in
November and December.

Net cash provided by operating activities during the current period was
approximately $5.2 million compared with net cash used of approximately $6.2
million for the same period in the prior year. The change in cash provided by
operating activities was principally a result of the loss for the period and
the net change in our inventories and accounts payable.

Net cash used in investing activities was approximately $1.2 million,
compared with approximately $7.9 million for the same period in the prior year.
Investing activities represent purchases of fixtures and equipment for store
openings and the renovation of existing stores, information system
improvements, as well as investments in other companies. Investments in and
advances to partially owned affiliates for the same period in the previous year
was approximately $3.2 million primarily as a result of a $1.4 million
investment made in The Sportsmans Guide, Inc. and a $2.0 million investment in
Take To Auction.com, Inc.

Net cash used in financing activities during the current period was
approximately $4.3 million compared with net cash provided of approximately
$14.1 million for the same time period in the prior year. The change was
primarily the result of the issuance of $9 million convertible notes in March
2000 and $6.5 million of proceeds received on the sale of common stock of
Envision Development Corporation, Inc.

Perfumanias three year senior secured credit facility with GMAC
Commercial Credit LLC provides for borrowings of up to $40 million of which
$34.3 million was outstanding and $2.7 million was available at November 3,
2001. The credit facility, which expires May 2003, supports normal working
capital requirements and other general corporate purposes. As of November 3,
2001, the credit facility bore interest at the rate of 5.0%.

Borrowings are secured by a first lien on all assets of Perfumania and the
assignment of a life insurance policy on an officer of the Company. The line
contains limitations on additional borrowings, capital expenditures and other
items, and contains various covenants including maintenance of minimum net
worth, and certain key ratios, as defined by the lender. As of November 3,
2001, Perfumania was in compliance with all financial covenants.

Management believes that Perfumanias borrowing capacity under its bank
line of credit, projected cash flows from operations and other short term
borrowings will be sufficient to support its working capital needs, capital
expenditures and debt service for at least the next twelve months.

During the thirty-nine weeks ended November 3, 2001, Perfumania closed 11
stores and opened 2 new stores. At November 3, 2001, Perfumania operated 248
stores. Management intends to continue focusing on improving the profitability
of its existing stores and plans to open approximately 2 new stores during the
fourth quarter of fiscal 2001.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

During the quarter ended November 3, 2001, there have been no material
changes in the information about our market risks as of February 3, 2001 as set
forth in Item 7A of the 2000 Form 10-K.




PART II.   OTHER INFORMATION




ITEM 1.   LEGAL PROCEEDINGS

Not applicable.




ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.




ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

Not applicable.




ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.




ITEM 5.   OTHER INFORMATION

Not applicable.




ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

|    |  |                      |  |                       
|--- |  | -------------------- |  | ----------------------
|(a) |  | Exhibits             |  |                       
|   
|   
|   
|   
|    |  | Index to Exhibits    |  |                       
|   
|   
|   
|   
|    |  | Exhibit Number       |  | Description of Exhibit
|   
|   
|   
|   
|(b) |  | Reports on Form 8-K. |  |                       
|   
|   
|   
|   
|    |  | None.                |  |                       

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E COM VENTURES, INC.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                        |  |     |  |                                                                                                           
|----------------------- |  | --- |  | ----------------------------------------------------------------------------------------------------------
|                        |  |     |  | E COM VENTURES, INC.                                                                                      
|                        |  |     |  |                                                                                                           
|                        |  |     |  | (Registrant)                                                                                              
|                       
|Date: December 17, 2001 |  | By: |  | /S/ ILIA LEKACHIlia Lekach
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
|                       
|                        |  | By: |  | /S/ A. MARK YOUNGA. Mark Young
Chief Financial Officer
(Principal Financial and
Accounting Officer)       

17